How can we define a budget in simple terms? Budget is a compilation of anticipated revenue and expenses, which is arrived at based on certain assumptions and presumptions. We all are familiar with the term 'budget' and practically using the same in our day-to-day life. Budget shall be prepared from individuals to households to small entities to large conglomerates to make their lives easy and planned. Those types of budgets are often prepared with a short to medium term vision in mind and less complex in its structure.
India as a Nation also does that exercise annually and we call it as Union Budget. In contrast to the budget that are being prepared by individuals and corporates, the Union Budget is being prepared based on numerous inputs with short term as well as long term planning in its hindsight. While preparing the Union Budget, the micro economic and macro-economic factors shall be considered and the funds shall be allocated based on the requirement in various key segments such as agriculture, rural development, urban planning, education, transportation, defense, technology etc. The fund allocation to various segments shall be planned based on the probable level of income that are being expected through direct and indirect taxation and other regular stream of revenues. If the income is more than the expenditure in a budget that is called as surplus budget. If the income is lesser that the expected expenditure , the same shall be called as deficit budget. The gap between the income and expenditure shall be bridged through loan funds, that are being raised by the Government from internal as well as external sources. This year, Union budget -2022 is a deficit budget and the government’s fiscal deficit for the financial year 2022-23 at 6.4% of gross domestic product (GDP) as the budget recognised the need to boost growth.
There are many ways to evaluate or analyse a budget document. One can see that from a political perspective or growth perspective or from a social perspective. If you analyse the Union budget 22 from a political perspective, there is nothing to cheer about for the ruling party as there is no too much soaps to lather the poll bound states. For the opposition parties, who were planning to make a hue and cry over favouritism or factionalism, that is a real disappointment. However from the growth as well as social perspective there is a lot more the cheer about, as the budget had took those on its shoulders with a plan to run a marathon and win a 9.29% growth in Gross Domestic Product.
There are two types of fiscal policy stance that are being adopted by economies of the World during the time of recession and recovery. One type of fiscal policy is pro-cyclical and other is counter-cyclical. In case of pro-cyclical fiscal stance, the Government will reduce the spending and increase the taxes during the contracting phase of economy, which will help them to reduce the burden of debt on the Government during the crisis period. During the expansionary or revival stage of the economy, the pro-cyclical fiscal stance will prompt the Government to increase the Government expenditure and reduce the taxes. The pro-cyclical approach further deepens the recessions and amplifies expansions, thereby increasing fluctuations in the business cycle. Whereas in the counter-cyclical fiscal stance, the government will increase its spending through debt funds and reduce the taxes with an intention to move the economic wheels of the nation, and aim to generate more funds to service the debts in future from the increased productivity and future taxes. The counter cyclical approach, softens the recession and moderates the expansions, thereby decreasing fluctuations in the business cycle.
As expected, the budget had given more prominence to growth aspect and adopted a counter cyclical approach for reducing the impact of the pandemic infused recession by focusing primarily on inclusive development, productivity enhancement, energy transition and climate action. In view the unprecedented economic crisis and negative growth rate in previous quarters, the Government had given more prominence to the fiscal expansion funded through higher Government debts. In order to boost the growth of the economy of the nation, the budget had adopted the counter-cyclical fiscal policy, which will enable the nation to spend more during the economic crisis.
The Government had promulgated a policy to use the public funds to crowd-in the private investment throughout the budget presentation. The Gatisakthi, which includes massive plans for expansion of railways and highways, integration of the ports and railway network etc as part of infusing the public funding. The budget underpins the fact that the public spending shall be executed through the private involvement , which helps to boost employment opportunities in the private segments. The Government had during the last budget made a bold and strong statement that the “government has no business in business” and the said statement is getting more bolder and brighter in this budget. The Government is not keen to directly employ the people and clearly putting that responsibility on the shoulders of private sector. At the same time, the Government is giving all support and strength to the private sector by creating avenues for generating the money and employment options.
The Budget proposed a new legislation in the place of Special Economic Zones Act with an intention to improve the corporate and business environment and make It more competitive. It also encourages the manufacturing sector and start-ups by opening up lot more avenues in solar energy and electronic vehicle segments. The budget had given equal prominence to the agricultural sector and socio-welfare segments by making huge fund allocations for the benefits of the needy. The budget vouches for universalisation of quality education and given heavy importance to health sector, housing and welfare.
The budget is feature rich in many aspects and innovative in thoughts, especially on its digital side. The digital currency, through block chains, is soon going to be a reality and the same will reduce the cost of printing and the attempt to make it fungible is simply a great thought. On another front, though the RBI had not considered the crypto currency as a legal tender and not approved the same yet, the budget had recognised it by putting taxation provisions on it. Crypto currencies are encrypted digital assets which has a notional value assigned to it by its dealers/traders. It's high time to regulate it as the same is creating a parallel and borderless economy, which can nurture illegal activities through parallel routes. There is a TDS of 1% of such transactions and the gain in dealing of such currencies shall be taxed at the rate of 30%. The crypto currency exchanges had welcomed the same as it is the first step to recognise it as a currency and soon we can expect a regulation to regulate the same in the market. The budget is giving due importance to technology based development and looking forward the same as a great employment generator.
The budget had not proposed any dip in the tax slabs and , on the face of it, nothing seems to be offered to salaried class. But in my opinion, the budget had created much more avenues for employment generation and proposed to develop a sustainable and esteemed populace. Gone are the days where the budget was read as a document to look for some tax soaps and benefits. The Government is playing its role in the right sense by deploying debt funds to smoothen the effects of recession and creating opportunities for a better India by pumping hard money into the raw nerves of the economy. Hence it can be concluded that the Budget 2022 is partaking as a vision document, rather than an election stunt, by putting forward reasonable and reachable goals with an objective to reach the goal of 5 trillion economy.
Bijoy P Pulipra, LL.B, FCS, IP, RV
Senior Partner | Artis Law House
Picture courtesy :Internet